Interactive Investor

FTSE 250 round up: Fed causes trouble for UK mid-cap shares

8th March 2023 13:37

by Graeme Evans from interactive investor

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Our City expert examines the winners and losers in the FTSE 250 index today.

Colourful arrows pointing in different directions

Robust mid-cap results were marred by poor risk appetite today as IP Group (LSE:IPO) and Hill & Smith (LSE:HILS) led an underperforming FTSE 250 index into negative territory.

Sterling’s three month low against the US dollar amid fears that the Federal Reserve may need to resume aggressive interest rate rises in the fight against inflation also did few favours for UK-focused stocks in the FTSE 250.

The second-tier benchmark fell 0.5% and further away from the 20,000 threshold by midday, whereas the blue-chip FTSE 100 was broadly unchanged in a session heavily influenced by worries over the type of landing facing the global economy.

The pressure resulted in a rare poor session on the FTSE 250 fallers board for Aston Martin Lagonda (LSE:AML), with Wizz Air Holdings (LSE:WIZZ) and Wetherspoon (J D) (LSE:JDW) also giving up recent strong gains.

Hill & Smith posted the biggest fall in the second tier, declining 64p to 1,350p as investors used annual results as the moment to reduce their exposure following a strong run for shares in the highways infrastructure and galvanising services firm.

Underlying profitability came in ahead of market expectations, up by 23% to £87.9 million, and the company plans to pay a 16% higher full-year dividend of 22p a share on 7 July.

With US businesses accounting for 64% of operating profit in 2022, Hill & Smith forecast good progress in 2023 despite the macro-economic headwinds.

It said its medium-to-long-term outlook was underpinned by market growth drivers behind both sustainable infrastructure and safe transport: “In particular, our US businesses are well placed to benefit from the increased levels of infrastructure spend approved under the Infrastructure Investment and Jobs Act.”

Hill & Smith was joined on the fallers board by IP Group, the backer of breakthrough science and innovation companies that include Oxford Nanopore Technologies (LSE:ONT).

IP’s pre-tax loss of £344.5 million was driven primarily by a reduction in the value of public companies of £428.5 million, in particular a reduction of £369.7 million for Oxford Nanopore as big gains seen after its 2021 stock market listing unwound.

Private portfolio company valuations have remained robust, however, with 90% of funding rounds in 2022 taking place at or above previously disclosed valuations.

Chief executive Greg Smith said a strong balance sheet offered continued scope to capitalise on opportunities in the UK and internationally. He added: “We have continued to see strong commercial progress and interest in our portfolio this year despite the economic headwinds and prevailing geopolitical environment.”

The company’s net asset value declined 20% to 132.9p but the final dividend due for payment on 22 June increased to 0.76p a share for a 2022 total of 1.26p.

Among FTSE 250 shares on the front foot today, shipping broker Clarkson (LSE:CKN) rose another 4% or 135p to 3,325p after analysts at Peel Hunt upgraded their forecasts by between 5% and 8% in the wake of this week’s better-than-expected annual results.

Reiterating a price target of 4,400p, Peel Hunt said the company’s best-in-class position across all segments of shipping, offshore and renewables, combined with free cash resources of £130.9 million, left the group “optimally positioned”.

Meanwhile, a positive reception to annual results helped shares in building products supplier Ibstock (LSE:IBST) to recover from recent weakness by adding 1.6p to 163.9p.

Revenues and profits came in materially ahead of both the prior year and pre-pandemic comparators, leading to the payment of an increased final dividend of 5.5p on 12 May.

Activity in the early weeks of this year has been in line with the more cautious demand patterns seen at the end of the fourth quarter, but energy price risk is well covered with over 80% of requirements secured for the first half and 65% for the full year.

Peel Hunt, which has a price target of 230p, said: “Volumes will be soft this year but we see recovery in 2024 helped by the group’s new plants. Valuation remains undemanding for a cash-generative business with options on cash deployment.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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